Categories: Forex News
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2023-09-15 3:12 PM

USD Index Dips: South African Markets Watch Key Data Points

 
  • The USD Index, after recent highs, is experiencing a corrective downward phase ahead of significant data releases, influencing South African markets.
  • Although there was initial anticipation of a rate hike by the Federal Reserve in November, current market chatter hints at potential interest rate cuts starting from the second quarter of the next year.
  • Key events to observe include the Industrial Production and Advanced Michigan Consumer Sentiment, while the underlying debate continues regarding the future trajectory of the US economy, alongside emerging geopolitical tensions with Russia and China.
By Nonhlanhla

In recent trading, the USD Index exhibited a downward trajectory, retracting from its upward spree observed over the past three days. After touching multi-month highs in the 105.40/45 zone last Thursday, the index seems to be in a corrective phase ahead of significant data releases.

This softening in the USD’s strength could have implications for South African markets, as international factors frequently influence the rand’s performance against major currencies. The prevailing trend seems influenced by a lukewarm risk appetite globally, particularly in European markets. Financial observers are still assimilating the outcomes of the recent European Central Bank (ECB) meeting, while US yields hint at an extension of Thursday’s rise.

Market dynamics are now oscillating, as earlier expectations of a 25 basis point rate hike by the Federal Reserve come November 1 are slowly dissipating. Instead, there’s mounting chatter about potential interest rate cuts commencing in the second quarter of the upcoming year. Notably, on the US economic calendar, forthcoming data includes Export/Import Prices, followed by insights into Industrial/Manufacturing Production, Capacity Utilization, and preliminary figures for the current month’s Consumer Sentiment.

Factors to Monitor in the USD Space

Although the USD Index experienced a minor retraction, the predominant upward bias seems intact, hinting at the possibility of reapproaching its 2023 high near the 105.90 mark (recorded on March 8). The greenback’s resilience draws strength from the robust performance of the US economy. However, speculations around the Federal Reserve’s monetary policy tightening are slightly waning, given the backdrop of persistent disinflation and a cooling labour sector.

Key US-centric events to monitor this week include Industrial Production and Advanced Michigan Consumer Sentiment slated for Friday.

Several underlying issues punctuate the financial conversation: The debate on whether the US economy will experience a soft or hard landing continues. There’s budding speculation regarding interest rate cuts possibly materialising in early 2024. Additionally, geopolitical tensions involving Russia and China remain a watchpoint.

Noteworthy Levels in the USD Index

Currently, the USD Index has dipped by 0.09%, positioning at 105.25. If it breaches 104.42 (the weekly low of September 11), this might pave the way towards 103.02 (200-day SMA) and potentially to 102.93 (the weekly low from August 30). Conversely, should an upward momentum resume, resistance could be encountered at 105.43 (the monthly peak of September 14), followed by 105.88 (the high of 2023 from March 8) and the symbolic 106.00 mark.

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Nonhlanhla

Nonhlanhla P Dube is a senior news reporter. Nonhlanhla is a student of International Relations at the University of South Africa. She reports primarily on personal finance and economics. You can contact her on: Email: nonhlanhla@rateweb.co.za

Tags: USD Index